Havells (Q1 FY14)

India Infoline News Service | Mumbai |

The management has guided for 12-14% revenue growth for standalone business in FY14 led by stronger growth in the consumer business, been offset partially by slowdown in the industrial business.

CMP Rs605, Target Rs645, Upside 6.6%
  • Revenues for the Indian operations in Q1 FY14 grew at paltry 1.6% on yoy basis to Rs10.5bn. The only segment which delivered healthy growth on revenue front was Switchgears, which grew at 14.3% on yoy basis. Industrial slowdown and limited availability of copper (raw material for cables and wires) led to decline revenues for Cables & Wires segment and Lighting segment by 6.1% and 1.1% respectively. High base effect and seasonal factors resulted into slowdown in revenue growth of electrical consumer durables segment to 6% on yoy basis.


  • Operating profit margin in the standalone business for Q1 FY14 witnessed marginal expansion of 7bps on yoy basis largely attributed to 209bps and 153bps increase in EBIT margin for Lighting and Electrical consumer durables segment respectively. EBIT margin for Switchgears segment contracted by 31bps on yoy basis. 


  • Revenues (€ terms) from its overseas subsidiary (Sylvania) decreased by 1% yoy, with 1% decline in revenues from both Latin American and European market. Volatile currency in the Latin American market and languishing demand scenario in European region were the key factors for the decline in revenues. Operating profit margin for Q1 FY14 contracted by 145bps to 3.9%. The management expects revenue to grow by 2% and foresees 5.5-6% OPM for Sylvania in FY14. 


  • The management has guided for 12-14% revenue growth for standalone business in FY14 led by stronger growth in the consumer business, been offset partially by slowdown in the industrial business. Profitability is expected to remain strong on the back of a) higher share of manufacturing v/s outsourcing and b) various initiatives taken by the company to improve efficiency. We have downgraded our estimates for the standalone business to build in slowdown in revenue growth. At current valuations, we believe the stock is fairly valued and recommend Market Performer with revised target price of Rs645.

Results table
(Rs m)
Q1 FY14
Q1 FY13
% yoy
Q4 FY13
% qoq
Net sales
10,513
10,353
1.5
11,696
(10.1)
Material costs
(5,484)
(5,613)
(2.3)
(6,281)
(12.7)
Purchase of traded goods
(907)
(914)
(0.8)
(1,202)
(24.6)
Personnel costs
(539)
(432)
24.9
(416)
29.4
Other overheads
(2,250)
(2,088)
7.7
(2,309)
(2.6)
Operating profit
1,334
1,306
2.1
1,488
(10.4)
OPM (%)
12.7
12.6
7 bps
12.7
(3) bps
Depreciation
(156)
(118)
31.9
(156)
(0.1)
Interest
(56)
(102)
(44.7)
(27)
112.0
Other income
32
2
1,233.3
34
(5.6)
PBT
1,154
1,004
14.9
1,340
(13.9)
Tax
(207)
(204)
1.9
(243)
(14.7)
Effective tax rate (%)
18.0
20.3
(230) bps
18.1
(17) bps
Reported PAT
947
801
18.2
1,097
(13.7)
PAT margin (%)
9.0
7.7
127 bps
9.4
(37) bps
Ann. EPS (Rs)
30.4
25.7
BSE 546.75 9.45 (1.76%)
NSE 546.30 7.60 (1.41%)

***Note: This is a NSE Chart

 

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